Bank of Japan board members continued to discuss the need to gradually unwind the bank's large-scale monetary easing measures, with many linking the timing of an eventual policy exit to clearer signs of sustained wage growth and a few noting they are entering an important phase of debating for reducing stimulus, according to the summary of opinions expressed at the BoJ's Jan. 22-23 meeting.

Policymakers agreed that they must maintain their easing stance"patiently" to support economic activity and structural reform toward a sustainable wage increase and stable inflation around 2 percent.

"Sustainable and stable achievement of the price stability target has not yet come in sight, and thus the Bank needs to patiently continue with monetary easing under yield curve control," one member said."Going forward, if a virtuous cycle between wages and prices is confirmed and achievement of the target comes in sight, the Bank will likely determine whether to continue with its large-scale monetary easing measures, including the negative interest rate policy."

Another member agreed:"To achieve the price stability target of 2 percent, it is necessary that wage growth continue to clearly exceed 2 percent and that the virtuous cycle between wages and prices intensify further."

Some members sounded more optimistic: One of them said:"There is a growing possibility that wage revisions for this spring will be at relatively higher levels than in the past; in addition, economic activity and prices overall have been on an improving trend. Given these factors, it seems that conditions for policy revision, including the termination of the negative interest rate policy, are being met."

"The Bank has likely entered a phase where it needs to determine the likelihood of achieving the price stability target of 2 percent in a sustainable and stable manner by examining individual economic indicators," another member said.

A third member was more specific about the timing, noting,"After assessing the degree of macroeconomic effects of the Noto Peninsula Earthquake by monitoring its impact for about the next one or two months, the Bank is highly likely to reach a point where it can normalize monetary policy."

Last week, Japan's government maintained its overall assessment for the second month in a row, saying the economy is recovering moderately with some soft spots, but warned in its monthly economic report that the powerful New Year's Day earthquake in the northwestern region of Hokuriku has reduced electronic parts supply and battered tourism.

"Given the current outlook for economic activity and prices, it is highly likely that accommodative financial conditions will be maintained even if policy actions such as the termination of the negative interest rate policy are implemented," one board member said, echoing remarks made by Governor Kazuo Ueda at a post-meeting news conference last week.

Discussion among board members turned more specific this month."Now is an important time to consider whether to adjust the degree of monetary easing down from the current extremely powerful level," one member said."In considering this, it is necessary to discuss the treatment of yield curve control and of the negative interest rate policy and to deliberate on the inflation-overshooting commitment."

Another member called for scaling back the bank's large asset purchases."The Bank's purchases of exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) have been conducted as part of its large-scale monetary easing," the member said."It is therefore natural for the Bank to discontinue these purchases once sustainable and stable achievement of the 2 percent target comes in sight. As the purchase amount of these assets has been very small since the change in the guidelines for asset purchases in March 2021, even if the Bank discontinues the purchases, it is likely that the impact on factors such as market conditions will not be significant."

At its Jan. 22-23 meeting, the nine-member board voted unanimously, as expected, to maintain its seven-year-old yield curve control framework and retain its guidance that it will"patiently continue with monetary easing" in order to"achieve the price stability target of 2 percent in a sustainable and stable manner, accompanied by wage increases."

Members likely continued discussing when they could see clearer signs of substantial wage hikes for fiscal 2024 staring in April. The summary for the December meeting showed that members argued that they should wait until the spring (from March to May) to confirm whether annual labor talks would lead to a substantial wage hike for the second fiscal year in a row before considering lifting the negative short-term interest rate target or ending the yield curve control framework.

The Bank of Japan releases the Summary of Opinions expressed by its nine policy board members six business days after each Monetary Policy Meeting.

The BoJ holds eight MPMs a year, in January, March, April, June, July, September, October and December. The BoJ began publishing the summary in 2016 to provide a brief look at what was discussed at the latest meeting as part of its efforts to increase the transparency of the conduct of monetary policy. The governor of the bank holds a news conference at 1530 JST (0630 GMT), a few hours after the release of the monetary policy statement, to discuss the board's policy decision and assessment of the economic and financial conditions. More details become available when the summary is published. Before 2016, market participants had to wait until the release of the minutes, which comes a month or two after the meeting because the board must approve the minutes at the following meeting before its release. The summary is edited by the governor and does not require the board's approval.